Professional Documents
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Economics
Paper 1
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P40329RA
©2012 Pearson Education Ltd. *P40329RA0120*
1/1/1/1
Answer ALL questions.
Some questions must be answered with a cross in a box . If you change your mind about an
answer, put a line through the box and then mark your new answer with a cross .
1 The figure below shows the demand and supply for laptop computers.
Figure 1a
Study Figure 1a
(a) (i) What is the equilibrium price of laptop computers?
(1)
A Excess demand
B Excess supply
C Equilibrium
D No demand
(iii) Define price elasticity of demand.
(2)
(iv) When price rises from $800 to $900 the price elasticity of demand is
(1)
A Elastic
B Inelastic
C Perfectly elastic
D Normal
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(v) With the aid of the data in Figure 1a, explain the answer you gave in (a)(iv).
(3)
(vi) Kim Chui is a student. He has saved enough money to buy either a laptop
computer or a second-hand motor bike. What is the opportunity cost if Kim
decides to buy the laptop computer?
(1)
(b) Figure 1b shows the demand and supply of laptop computers in Jamaica. In 2009
the government of Jamaica announced that it was placing a 16.5% tax on laptop
computers.
(i) On Figure 1b show the effect of this tax on laptop computers on price,
quantity demanded and quantity supplied.
(2)
Price
P1
Q1 Quantity
Figure 1b
(ii) Identify and briefly explain one other factor besides a sales tax that might
change the price of laptop computers.
(2)
. . . . . . . . . . . . ................................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............................................................................................................................................ . . . . . . . . . . . . . . . . . .
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(c) In 2009 the Jamaican government increased the minimum wage rate by 10%.
(i) What is meant by a minimum wage rate?
(2)
(ii) An increase in the minimum wage rate will benefit only a small number of
people in a country. Do you agree with this statement? Give reasons for your
answer.
(6)
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(d) (i) With the aid of an example, explain what is meant by the term division of
labour.
(3)
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2 Julia is a hairdresser. She used to work in a hairdressing salon but now she visits her
clients in their own homes.
(a) (i) Julia is an entrepreneur. Define the term entrepreneur.
(2)
(ii) Below is a list of some of Julia’s costs. Place each cost in the correct column
(3)
Example: Loan repayments
1. Petrol
2. Car insurance
3. Shampoo
loan repayments
Julia has calculated that her fixed costs are $450 each month
In July her variable costs were $150
(iii) Calculate Julia’s total costs for July. Show your workings.
(2)
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The following table shows Julia’s revenue and variable costs for August.
August
Revenue $1200
Variable costs $160
(b) Julia received help from the government to start her business.
(i) Identify and briefly explain two methods a government can use to help
individuals to start their own businesses.
(4)
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(ii) How important are government schemes to encourage the setting up of small
firms in an economy?
(6)
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(ii) Briefly explain one reason why privatised firms may need to be regulated.
(2)
(iii) Discuss whether the costs of privatisation outweigh the benefits to the
economy.
(6)
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3 Figure 3a shows the rate of inflation in Vietnam from 2007 to 2009.
Rate of Inflation
25
20
15
%
10
0
2007 2008 2009
Figure 3a
(a) (i) Define rate of inflation.
(2)
(ii) With reference to the data in Figure 3a, describe what happened to prices in
Vietnam between 2008 and 2009.
(2)
a decrease cost-push
demand-pull a deficit
a surplus an increase
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(v) Identify one function of money.
(1)
(vi) Briefly explain one effect of inflation on the function of money you have
identified in (a)(v).
(2)
Figure 3b shows the balance of payments on current account for Vietnam from
2007 to 2009.
0
Vietnamese dong (billion)
–4
–6
–8
–10
–12
Figure 3b
(b) (i) Using the data in Figure 3b, describe what happened to the balance of
payments on current account from 2007 to 2008.
(2)
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The balance of payments on a country’s current account shows the trade in visible
and invisible imports and exports.
(ii) Give an example of a visible import.
(1)
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(c) (i) In 2008 the government of Vietnam increased the rate of interest from 6.5%
to 10.25%. An increase in interest rates is an instrument of
(1)
A Fiscal policy
B Monetary policy
D Regional policy
(ii) Briefly explain two reasons why an increase in the rate of interest might lead
to an increase in the level of unemployment.
(4)
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(iii) To what extent are supply side policies likely to be successful in reducing
unemployment?
(6)
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4 (a) (i) The increasing interdependence and integration of the world’s economies is
known as
(1)
A Globalisation
(iii) Briefly explain two reasons why free trade may be considered a disadvantage
to developing countries.
(4)
In 2009 the Ford Motor Company announced plans to spend $490 million on
building a third car assembly plant in China.
(iv) The plan by Ford to build a car assembly plant in China is an example of
(1)
B Foreign Aid
C International Grant
D Export
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(v) Briefly explain two likely reasons why the Ford Motor Company plans to build
a third car assembly plant in China.
(4)
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In December 2009 the United States of America (USA) International Trade Commission
accused China of unfair subsidies. It stated that Chinese producers were dumping
steel pipes, used for oil and gas drilling, on the American market.
(b) Explain what is meant by the terms
(i) subsidies
(2)
(ii) dumping.
(2)
The USA International Trade Commission has announced tariffs ranging between
10% and 15% on Chinese steel pipes.
(iii) Do the benefits of tariffs outweigh the disadvantages for a developed
economy, such as the USA? Explain your answer.
(6)
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(iv) Identify and explain one method, other than tariffs, that a government could
use to reduce the demand for imports.
(2)
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